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Deleveraging (Cont.)

Carrier Hotels Staff Posted Feb 6, 2004

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As funding becomes more available, data center providers are raising money to wipe out debt - or at least shrink their payments. The latest providers to take this step are FiberNet and Equinix, two companies that have made deleveraging their balance sheet a priority.

Equinix said this week said it will sell between $75 million and $87 million in convertible debt, and use the proceeds to pay off its senior credit facility and two other loans, with the balance used for working capital. With its stock trading at nearly$30 a share, Equinix is benefitting from a sustained program to pay down its debt and a flurry of deals with blue-chip customers.

On Monday FiberNet issued $8 million in stock and warrants, and will use it to pay down $5.5 million of its senior credit facility.

Equinix and FiberNet are two of the survivors, and one key to their success has been debt management. In the fall of 2002, FiberNet and Equinix each owed nearly $100 million on their senior credit lines. After its $5.5 million payment, FiberNet will owe just $16 million. Equinix has $35 million outstanding on its senior credit line prior to the new funding, meaning it can pay the entire balance if it chooses.

The two companies' deleveraging strategies have included complex deals and recapitalizations, the kind where reading the press releases and SEC filings can make your brain hurt. But it's paid off, and is likely to pay additional dividends as the industry recovery picks up steam.